Deregulation Time: Have energy prices changed since the caps came off last year?

story by Samantha Wittchen

By mid-2010, news of PECO’s energy rate caps expiring had the media filled with doomsday tales of electricity prices rising 20 to 30 percent by the end of the year. And then, a strange thing happened – or rather, it didn’t happen. As the ball dropped at midnight on January 1, 2011, electricity rates remained stable. In fact, for many customers who took advantage of the opportunity to switch electricity suppliers, their bills dropped. So, what’s the story? Was the fear that deregulation was going to send us to the poorhouse just hype?

When looking at what happened as rate caps expired in other parts of the state, it seemed logical to predict a price jump here in the Philadelphia area. For example, in 2010, PPL, a major energy company in Pennsylvania, had customers see significant rate increases. But by 2011, the stagnant economy had changed the market. Wholesale electric prices had decreased, and PECO customers were already paying more for their electricity due to higher competitive transition charges (temporary charges to cover costs of previous power generation investments). In late 2010, PECO formally announced that rates would only rise by about five percent. With more modest increases, many residents remained with PECO, citing confusion about options available, fear of being taken advantage of, and lack of time to search for savings.

But perhaps more important than

the savings is how the rate cap

expiration has shaped the conversation

in the region around energy.

As of March 2012, the Pennsylvania Public Utility Commission (PUC) reported only 25 percent of residential customers had switched to a new supplier. For those who did switch, many discovered lower rates. In some cases, customers now pay less for clean, renewable energy than they would have for dirty-sourced energy. But perhaps more important than the savings is how the rate cap expiration has shaped the conversation in the region around energy.

Before deregulation, residents had few options for renewable energy. Now, there are 11 suppliers. These choices have allowed Philadelphians to talk more specifically about renewable energy, says Alex Fuller-Young, electricity program manager for the Energy Cooperative, a Philadelphia nonprofit energy cooperative offering members Pennsylvania-based renewable energy. Residents can discuss what actually constitutes renewable energy (i.e. Does coal waste count?) and whether sourcing renewable energy locally versus from somewhere across the country is important. “This is the conversation that the Energy Cooperative wants to start having,” says Fuller-Young, “and it has been enabled by the rate caps coming off.”

Renewable energy providers and residents who want to purchase renewable energy aren’t the only ones to have benefited. With the City of Philadelphia able to purchase electricity from suppliers other than PECO, the Environmental Protection Agency (EPA) has targeted Philly to become the largest green power-purchasing city in the country. “Green power purchasing” is the percentage of total power purchased from renewable sources. Washington, D.C. is currently the top green energy user, although our own Borough of Swarthmore ranks third in the percentage used category. Through EPA’s Green Power Community partnership program, local government, businesses and residents collectively buy green power. In order to surpass D.C., Philadelphia needs to get more than 8.5 percent of its power from renewable sources. And thanks to expanded electricity choices, that could happen.

The predicted rate increases were not crippling, as some expected they would be, but consumers are now exposed to another danger: price fluctuations and potential rate increases based on the energy market. So while the rates are comparatively low now, there is no guarantee they will continue. Luckily, the deregulation has pushed the renewable energy conversation forward, giving customers more (and greener) options than PECO.